Macroeconomics: Policies and Strategies for Inflation and Unemployment

This article discusses the policies and strategies used in macroeconomics to tackle inflation and unemployment. It explains the concepts of fiscal policy, monetary policy, and exchange rate policy. The article also highlights the challenges faced by the government in implementing these policies and the importance of sustainable growth.

Macroeconomics

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Macroeconomics is a division of economics as a subject that primarily puts focus on the
economy as a whole and the market that functions on a big scale. It has dealings with the
composition, presentation and actions of the economy. Macroeconomic policies are the
distinctive policies that are related to the operations and workings that occur in the economy.
These are enforced in the economic system by the government. The government of the country
puts its primary focus on the achievement of the various objectives in the country. These policies
are properly explained and go through a line of effects that occur when the economic decisions
are primarily implied by the government in the country (Arestis and Sawyer, M. eds., 2019).
The main focus of such policies is to carry the developments that takes place and also
stabilizing the economy of the country. These policies assist the business organizations to aim
for sustainable development in the society. There are job opportunities, betterment in living
standards and maximisation of wealth is aimed for the individuals of the country. It also aims to
neglect the gap that occurs between the rich and poor class of people in the society. The primary
focuses of the macroeconomic strategy are: Fiscal policy, Monetary policy and exchange rate
policy.
The administration of the country utilises these policies for attainment of various
macroeconomic goals that assist the country to grow and establish harmony among the citizens
of the country. These macroeconomic policies are the essential tools that the government takes in
use to aim for full utilisation of country's resources and attainment of macroeconomic objectives
of the nation. The proper implementation of these policies assures that the unemployment and
negative factors in the economy reduce to a certain level (Arezki and et.al., 2018).
These plan of actions in the macroeconomics are mentioned in depth in the essay below
highlighting the way that the UK government utilises them to deal with the rate of inflation and
the unemployment that prevails in the country.
MAIN BODY
The financial planning of the macroeconomics showcases the utilisation of the
administrative income and the expenses. The limit of expenditure that is asked for an individual
citizen from the public authorities of the country. This helps the country balance out on the

expenses incurred in the form of tax distribution and public authority uses. The motive of using
this approach is aimed to incur the alterations in the total interest of economy by dominating the
arbitrary cash flow of citizens in the country. To provide for such cases the public authorities of
UK are required to put focus on this as the cash flow in the economy has been increasing. For
this purpose, these authorities will increase the tax duties for the purpose of influencing the
various banks to increase their own financing cost for loans and advances (Arnon, 2022). As this
would lead to the borrowers in the economy attain lesser assets that would result in the decline of
cash flow in the economic system leading to lesser utilization. All these incidents will certainly
then impact the cash flowing in the economic system as it would reduce. The other primary issue
of employment, as the economy is facing major collapses which conclude that the assets in the
economy have stuck at a point. For such condition, the public authority has aimed to deduct on
the part of income taxes that are borne by the individuals and put an increase in the income levels
further. This will lead to decrease in the costs associated to different kind of loans and advances
for the assets and various other credits. This will then lead to increase in the interest’s amount of
the company and increase the cash attained with the buyers and hence will lead to increased
consumption. The overall interest will lead to an increase and the flaws in the economic system
will certainly reduce. These continuous factors will lead the fundamental way through which the
public authority of the economy will influence the interest amounts for improving the economic
issues pertaining in the country (Carrera, 2022).
Monetary policies of the macroeconomics suggest to the apply various components such
as open market conditions, discount rates, reserve requirements. The monetary approach has
overall control on the cash that is reachable with peoples of the country. The public authority
utilizes the assistance of its public bank to decisively deal with the expansion, financial
development, pace of utilization and so forth. The national bank of UK is Bank of England that
help or suggest country economy to achieve its macroeconomic objectives.
The basic focus point of this provision is the system of financial communication which
occur in the market economy. In this plan of money, the country national bank goes through the
intermediary. Estimating that there is a current growth in the economy and it mainly incline that
there is the highest cash course in the market economy. The country national bank will provide
multiple securities and convert the open market. When the financial supporter entertains with this
security and achieve them, the quantity of assets analysis which are streamlined and watch with

this, the economic interests will reduce and cut down the hole of inflationary in the market
economy. In this circumstance there is a happening deflationary issue in the economy of market,
the national bank will buy back its securities and buy from the operations of open market. This
supply of purchasing assets with people in the market of economy, the business and the uses in
the economy will increases bettering the overall interest and reducing the hole of deflationary in
the market economy. The strategic point is to supply the movement of cash in the economy of
market.
The policy of exchange rate is an another policy of macroeconomic which is utilized by
the political party of the nation. It supports the system of exchange rate of the nation. This
individual policy is basically related with the value of national exchange with the foreign
economics currency. The political party may utilize to provide the inflationary or deflationary
disparity in the market economy by realizing and decreasing the economy of domestic currency.
The exchange rate of monetary and fiscal policy goes in hand. When the country of economy is
facing more inflation, then the rate of interest tends to increases in which they attract the foreign
investors and in get back this would rise the country’s economy demand.
Inflation in the economy shows higher prices and the amount of products in a market
economy over a certain time period. In context of inflation, the economy watches a continuous
increase in the normal price stage of goods and services manufactured in the market economy.
These products are mainly coming into the daily use of food, fuel, clothing and transportation
etc. it also shows to increase in the money supply, income and the goods prices. When they see
the increases in the economy rate of inflation. It carries and also influence the supply chain. The
buying capacity of the currency reduces because of the inflation in the economy. This reduction
in the buying capacity create a pressure of inflationary on a equilibrium level of market
economy. The overall demand of the economy tends to increase and this is the reason to increase
in the price level of market economy.

Changes in the Inflation rate of the UK in last 10 years.
The graphical presentation expresses the variations in the rate of inflation in the UK
country for the past 10 years. The ideal rate of inflation in which the economy concentrates on
keeping is nearly about 2%. the above graph seen that in last 10 years, the nation was dealing
with an inflation rate is nearly about then in the year 2015, the nation saw a very less inflation
rate which was nearly about 0% which makes other sort of problems which means that there is
very low money supply. It creates low trust among the investors and stop them to invest and it
cause to decline in the rate of consumption. The nation is presently watching the rate of inflation
nearly about 5% which can be deliberated as above to the satisfactory inflation rate. The country
economy dealing with the inflationary pressure if there are no long term monetary and fiscal
policy executed. To handle this the political party should execute the short term monetary and
fiscal policy to carry down the rate of inflation.
Unemployment is an another problem in an economy. It refers to the individuals who are
ready to do jobs and actively seeking a job which are unable to find a job opportunity. It also
includes people in the workforce who are already working on daily basis but they do not have
proper job. These type of groups are known as unemployed groups. Every economy needs to use
their resources more effectively and efficiently. Unemployment can disturb the whole economy
of the nation. If human resources not working than it will negatively impact the economy. An
economy can be influence by the various factors such as lack of control over resources,
unstructured infrastructure, poor approaches to employee creation and unsatisfactory government
policies. To provide growth to the economy, government make changes in various policies such

as monetary and fiscal policies. When the unemployment rates are higher than expected than the
rate of investment proposal is decreases, resulting job opportunities are also reducing to an
extent. Government can take steps in order to increase job opportunities by lowering the taxes
and increasing its expenditure which may increase investment opportunities. It can also reduce
the interest rates for the loans with the help of national bank which attract people to invest funds
in their businesses. It provides fuel in the growth of the economy.
The above graphical presentation reflects the fluctuations in the unemployment rates for last ten
years in the UK's economy. It can be states from above figure that UK is able to decrease the rate
of unemployment from last 10 years. Government adopt various macroeconomic policies and
strategies to reduce unemployment. Unemployment rate before 10 years was 8% and this is
decrease year by year and now it is about 4% which shows that government of UK is working
effectively to solve concern about unemployment
With the benefits, the monetary policy also contains some demerits which are discussed
further. The monetary policy does not assure with context of economy as at the time of recession
in economy not all customers have the ability of spending and intakes the advantage of less
interest rates. Arrangement of money can lead to cutting down of costs of loans but they do not
assure the purchases. Financial arrangement allows banks to acquire assets with lower financing
cost in comparison to national bank, which they can utilise as a credit to their clients. Regardless
some banks have funds which propose that there will be a decline in finances that consumers can

obtained from them. There was only decrease in costs of loan still their power can be increased
at such rate which can discourage them as they put huge steps of assets in their operational
capital and in the situation that rates builds, their assets get obstruct.
Some merits or benefits of Fiscal policy are discussed below. It assists in reducing of
unemployment as when the speed of unemployment increases then the public authority carries
out financial approach. It signifies the increases in consumption level and reduction in
assessment rates. In a situation to meet organisations demand, the companies will upsurge its
manufacturing and production that will also generates more job opportunities for them. Due to
various fiscal methods the nation can have a benefit of the development in economy of nation.
For instance, when tax rates are decreased then the enterprise and individual gains huge
incentives that they can invest in different sectors which will automatically results in the boost in
economy.
There are certain issues related to fiscal policy which are elaborated further. When the
government put in the mix of fiscal policy in relation to which certain times various factors
contradicts with each other which originates a situation of disputes among them. They can
elevate more finance with the assistance of issuance of bonds that will upsurge spending power
and increase rate of growth at the same time. The implication of fiscal policy generally slows
down because these polices are applied when they get an approval from process of government.
Even in a situation of increased government spending, it becomes a time consuming process, for
funds to gall in the consumer’s side.
Following quoted are the merits of foreign policy. It will uplift the economic welfare of
nation depending on the development of such policy. Every nation should focus on best outcome
from the foreign policy generated by them. Foreign policy facilities a number of countries to
involve in international trade methods and the countries which have different policy can operate
business operations without any difficulties as compared to those nations where policy controvert
with each other. These policies are planned to assure that the country acquires the best deals in
their hands and they are beneficial for the citizens of that nation. It is significant to note that
policy are meant to be beneficial if they benefit the citizens of that specific nation in term of
development of more opportunities.
Demerits of foreign rate policy, many times foreign policy made obstacles for the
investment of the domestic investors in the country and the countries which are having policies

do not get feasible investment because of the policy. The foreign policy of any country is
interlinked with the political environment of a country which represents that the connecting
republic may have with the substitutes counties as well. There are times when a foreign policy of
country do not favour the country which directly impacts the other country in a negative manner
on the exchange rate of the economy.
There are many hurdles which are being faced by the government at the time of
implementation of the policies for decrease the rate of unemployment and maintain the rate of
inflation in the country. These type of challenges adversely affect the country at the time of
fulfilment of the objectives. The most common and the main challenges faced by the economy in
implementing the policies will be discussed further.
Sustainably in growth plays the major role in the growth of the economy. It is termed as the
rate of growth which is being prepared by the government in the policies and which majorly
focuses on the growth of the economy as well by saving the natural resources for the usage of
future generations as well. It can be bridge between the growth of the future generation and
growth of the economy as well. There is challenge which is faced by the government while doing
the implementation of the policies for reduce the inflation and the rate of unemployment,
government has taken preliminary actions while keeping in mind the adverse impact of the
policies on the growth of a sustainable economy. This thing can be only seen in longer time of
horizon. The government has to bring a mode of change in the immediate demand in a proper
manner that it does not utilizes the funds which are available for future generations and not
increasing the total supply by utilising all of them. All the decisions are adversely examining
which are taken by the government and their impact on the objectives of the growth of the
economy.
The next hurdle which is faced by the government while running the economy and
implementation of the policies which creates pressure and havoc which is created in the market
or the economy which directly decreases welfare in the economy. When the government makes
policies which are strict in nature that decreases the inflation and unemployment, and hence the
welfare of the economy is compromised. The focus of the government is on implementation of
the methods for rectifying the economic welfare of the business which is to prove the stability of
the growth of the economy.

CONCLUSION
From the essay which is mentioned above, it can be considered that, the different policies in
macroeconomics play a crucial role in handling the inflation and declining of growth in the
economy. The monetary and the fiscal policies of the country are majorly made and then they
mostly it directly goes with economy while measuring such issues The monetary policy of the
government is done and governed by the central bank of the country while the fiscal policies of
the business are handled with the help of taxes and spending of government. There are various
kinds of challenges which are being faced by an economy while implementation of policies but
the most important role of the environment in the economy is necessary to face these challenges
and utilizes all the resources in a good manner.

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